How Brexit Will Affect You
We are now over 2 weeks on from the referendum result that shocked the world. Contrary to many of the arguments, World War 3 has not yet started and for the most part, life still goes on. That being said, the more utopian views of of market stability and open arms from the European establishment have also proved to have been somewhat far from the mark too. As the UK and Europe continue to pick themselves off the floor over the coming months, the metaphorical dusting off that will occur will no doubt mean some pretty significant changes for the everyone. So what is this likely to mean for contractors like you?
Freedom of movement is clearly now under threat, particularly given that polls show of the people that voted that ‘One third (33%) said the main reason was that leaving “offered the best chance for the UK to regain control over immigration and its own borders.”’ Given these results as part of the overall leave analysis its hard to see how Theresa May could continue with the policy in the face of her own legitimising general election. The results of this for European workers who don’t yet reside in the UK are bleak but for those already here, things are just very uncertain. Uncertainly however is not the friend of business and so, whilst business has remained calm for the moment, this may start to have an effect on hiring later on. The upside is that there is likely to be heavier weighting on contract recruitment from now and probably increasing up to official Brexit, the downside is that the labour market overall is likely to be constrained as firms aim to cut back spending and hold off investment until things become clearer. Another plus is that burdensome EU employment legislation is likely to go, most notably Agency Workers Regulations, which companies and contractors alike regard as completely absurd in the UK since most contractors are already paid more than their perm counterparts anyway. This will certainly be welcomed by business who have long viewed EU employment legislation as anti-competitive, but also to contractors as the tearing down of red tape will open more doors.
The other most significant effect is of course going to be on your bank balance. During election night the city remained open in parts in order to keep trading currencies. Given the strength of the pound when the polls closed (usually the most accurate prediction of election results) this was seen as the closest thing to an exit poll and as such, it took just 15 mins for some leavers to concede defeat. Probably the earliest indication of the direction things we’re going however was when demand for the pound totally evaporated, diving to historic lows in a matter of mins. Now the dust has started to settle on the result, the volatility is dissipating to reveal a new normal of €1.19 and $1.29 to GPB respectively. For the vast majority of contractors and small businesses this is likely to be bad news. Whilst its good news for exports, and by association manufacturing, engineering and the workers of these industries, other sectors such as financial services which are less sensitive to reducing trade deficits, have the potential to suffer. A more general point on the financial effect of Brexit is that the weak pound will almost certainly usher in inflationary pressures that will in turn make lots of things more expensive, particularly for companies themselves but also for the vast majority of us paid in sterling. British based contractors working in Europe however have just seen their rates increase by at least 10% on the back of this result so there are definitely some winners here too.
Clearly, these are turbulent times for the UK and we are in uncharted territory. What’s more, the result of the referendum has created a major vacuum of leadership at a time when its needed most. Today see’s the unexpectedly swift ascension of the new UK prime minister, the very speed of which should offer markets and employers some feeling of calm. Ms May is often seen as a sensible and pragmatic politician, much less ideological than the duo that was David Cameron and George Osborne. There will be a new cabinet in place by the end of the month, and it’s thought that the next one, in light of Brexit and the nations concern on bureaucracy, look to take a ‘less nanny-ish approach to government, particularly as they seek to attract the growth and investment the country will no doubt be in desperate need of. Just this week we have seen numerous manoeuvres by George Osborne courting non EU leaders for trade deals and pitching for a 15% corporation tax point for small business. This of course would be a massive bonus to all contractors operating their own limited company for sure, although its unclear where the money to make this happen has come from. If nothing else though it’s a clear sign of the treasury’s new policy direction, one that looks to favour business over excessive regulation and one therefore we hope will bring about common sense changes to the contracting burdens of things like IR35, intermediaries legislation and AWR to name a few, but of course we’ll have to wait and see.